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Samsung Suffers Smartphone Slowdown

Ray Le Maistre
7/8/2014
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Samsung Electronics gave a reminder of the smartphone market's volatility early Tuesday by announcing that it expects to report second-quarter sales of about 52 trillion Korean won (US$51.4 billion) and an operating profit of about 7.2 billion won ($7.1 billion), down 9.5% and 24.5% respectively from a year earlier.

The company cited increased competition in China, slower smartphone market growth, a build-up of device inventory in Europe, and a strong Korean Won as the factors affecting its anticipated second-quarter numbers. It also noted, though, that it expects a more positive third quarter.

That may be optimistic: As this Reuters report shows, Samsung Electronics Co. Ltd. (Korea: SEC) is likely to come under even greater pressure in the coming months from aggressive smartphone rivals and the anticipated launch of Apple Inc. (Nasdaq: AAPL)'s next device (the successor to the iPhone 5).

However, Samsung's share price edged up on the Korean exchange to 1.295 million won as investors kept faith that the company would improve its margins.

Samsung may be the global smartphone market leader, but it is set to come under sustained pressure in the mass-market smartphone sector from the likes of Huawei Technologies Co. Ltd. , Lenovo Group Ltd. (Hong Kong: 992), Xiaomi and ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), among others -- maybe even Microsoft Corp. (Nasdaq: MSFT). (See China Smartphone Star Eyes US Market , Huawei Handset Man Jumps to Lenovo, Microsoft's Elop Denies He Was a Trojan Horse , Huawei Boss Tells Handset Team to Sober Up, and Asia Strengthens Its Grip on Smartphone Market.)

It should also be noted that Samsung caused similar jitters a year ago with a similar financial report, but it's unlikely to become the next BlackBerry any time soon. (See Samsung Guidance Causes a Stir and BlackBerry Q4 Sales Sink to Sub-$1B.)

— Ray Le Maistre, Circle me on Google+ Follow me on TwitterVisit my LinkedIn profile, Editor-in-Chief, Light Reading

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mhhf1ve
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mhhf1ve,
User Rank: Light Sabre
7/9/2014 | 9:53:26 PM
Everyone in this market is entering the "plateau of productivity"
Hasn't the tech market seen this happen before? PCs had a huge spike.. and then leveled off and then now desktop sales are steadily declining... but not going away entirely (yet?). Smartphones and tablets and wearable or whatever comes next will likely follow similar paths as the market saturates and consumers can only own at most 2-3 smartphones simultaneously.... 
DOShea
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DOShea,
User Rank: Blogger
7/9/2014 | 5:49:21 PM
Maybe not the next BlackBerry...
...but still, changes ahead? http://online.wsj.com/articles/foreign-investors-put-pressure-on-samsung-1404758013

 
kq4ym
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kq4ym,
User Rank: Light Sabre
7/9/2014 | 9:09:17 AM
Re: Samsung factory robbed
Even a large heist in Brazil should not put that much of a dent in profits and sales. But Samsung is certainly suffering the results of increased competition in the industry. And it may not be a trend we see in the reduced profits but just a glitch in the normal ups and downs of sales.
Susan Fourtané
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Susan Fourtané,
User Rank: Blogger
7/9/2014 | 5:31:31 AM
Re: Samsung factory robbed
Kruz, 

Samsung made refernece to a decrease in sales of its high-end devices affecting both revenues and profits.

If we consider just the three new high-end devices Samsung launched since January, and then we consider the many consumers who are waiting for Apple's September announcement we can conclude that the possibilities of Samsung's sales being successful were not high.

And I am not even starting with the other six devices. Samsung is focusing in quantity, not in quality. Some people still appreciate quality in the first place.

-Susan   

 
Kruz
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Kruz,
User Rank: Light Sabre
7/9/2014 | 4:08:56 AM
Re: Samsung factory robbed
Its also due to the fact that the Korean currency is doing very well and that tablets are not that frequently replaced when compared to tablet PC. The phablets are also negatively affecting the tablets, especially in 3rd world countries.
Susan Fourtané
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Susan Fourtané,
User Rank: Blogger
7/9/2014 | 3:55:07 AM
Re: Samsung factory robbed
Kruz, 

If the robbery took place at the time of the game plating at the moment --which most likely did-- they had a least two to three hours to load all the devices and disappear. 

Samsung's slowdown was way before that, of course. Releasing nine new tablets in all low, mid, and high-end cathegories since January probably contributed to the slow down. That's too many new products in a very short time. There is no way it could have worked well. 

-Susan
DHagar
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DHagar,
User Rank: Light Sabre
7/8/2014 | 7:48:27 PM
Re: Samsung Factory Robbed
@Kruz, Incredible!  That must have taken a long time - they must have timed that to the World Cup, or something that would allow enough time to not be discovered.

To Ray's point though, it does make sense that the overall market growth would not keep the high-paced growth trajectory it was on.  Now, the competition will get stiffer.

I'm with you though, I have noticed the pictures are Samsung - I think they will do OK!
Kruz
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Kruz,
User Rank: Light Sabre
7/8/2014 | 9:18:59 AM
Samsung factory robbed
I might have an answer for Samy's slowdown. It's brazilian factory was robbed yesterday; a 36 millions worth of goods :) I wonder how much time it took them to load smartphones or tablets worth that amount!
Kruz
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Kruz,
User Rank: Light Sabre
7/8/2014 | 9:16:26 AM
MSFT?
I dont see MSFT causing a threat to Samy anytime soon. LG possibly with its latest flagships or the excellent Xperia Z phone series.

Has anyone noticed that during the WC, whenever a random spectator holding a phone and taking a picture is photographed, it's a Samsung?
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